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It stands to reason that the world's largest democracy should have the world's most drawn-out general election. India's election, which began on April 7, could still take weeks to resolve, and is proving uncommonly close and divisive.

For investors in the Indian equity market, knowing how to position depends partly on the likely outcome, which is difficult to call. But Nomura had a crack at a prediction yesterday and identified 11 stocks it thought would benefit.

Nomura's base case is that there is a "high probability of a stable government with a focus on reforms". It expects the BJP-led National Democratic Alliance to secure a strong mandate in the elections and to form a stable government at the centre. This outcome is, by the way, not universally expected, but if it does happen, the outcome should be positive in terms of the macroeconomic picture, "as we believe that it would lead to acceleration in economic reforms accompanied by continued prudent monetary policy," according to Nomura's Saoin Mukherjee. That, in turn, should lead to benign growth and inflation.

If Nomura's right, the key beneficiaries will be financials, infrastructure, and oil and gas.

Banks will benefit if there is a renewed focus on infrastructure and power sector reform. Banks have been performing well for a few weeks now in India, but Nomura says most of them still look inexpensive and are trading below five-year mean one-year forward price to asset book value multiples. Nomura picks ICICI, Axis Bank, Yes Bank and State Bank of India to represent the sector.

If India gets the stable government that Nomura predicts, it will be capable of making faster decisions and addressing bottlenecks in infrastructure projects. That should be good for selected names in transport, power and ports, although again, valuations in all three have climbed in recent months. Nomura picks Coal India, Concor, Adani Port and Voltas.

Finally, a strong and stable government might be able to deal with the thorny issues around gas prices and fuel subsidies. If gas prices were raised, Nomura says, this would markedly change the investment climate for the sector. Nomura's choices here are Reliance Industries, BPCL and GAIL.

All told, Nomura's equity strategy team, which had set a target for the Sensex index of 24,700 by the end of this year, now reckons there is 5 to 10% potential upside if the NDA government wins comfortably.

All well and good. But is this the most likely election outcome? Narendra Modi, the BJP's candidate, is a popular but controversial figure; his tenure as chief minister of Gujarat has included some troubling times, most notably the killing of Muslims during riots in the state in 2002. He and his party are considered pro-business - Gujarat has thrived economically under him - but there is a view that it would be difficult to attract others to work with him within a coalition, which is the common arrangement in Indian politics. His opponent in the governing Congress party is Rahul Gandhi, who despite his famous name (he is the son of Sonia and Rajiv Gandhi, and the grandson of India Gandhi) is relatively inexperienced in the political arena.

Many are not expecting the clear mandate that Nomura outlines, but instead a perhaps uncomfortable combination of differing political voices. "Predicting India's election outcome with any certainty is fraught with risk and once again, there is a high likelihood of a coalition government," says Arvind Chari, fund manager at ACPI Investment Managers. "Since 1980, six of the nine governments in India have been coalitions. During this time, GDP growth has averaged 6.3% a year." If investor expectations are around that level, Chari says, then they shouldn't be too disappointed no matter what the election outcome is.

Shaily Mittal, chief India economist at MNI Indicators, notes that Indian election polls "have been grossly inaccurate in each of the previous two national elections," with Congress winning in 2004 when polls had said the BJP would retain power, and winning again by the largest total in 20 years in 2009 when the polls had expected a close fight. It's sobering to recall the result of the 2004 mis-prediction: "The biggest single-day sell off of stocks in more than four years," Mittal says.

"The danger for equity markets is that they are strongly pricing in a Modi win. Even if business positive Modi wins, the rally in markets has been nothing but spectacular given the current economic malaise, leaving them very open to disappointment." In this reading, it might be better to take money off the table since it appears the market is already factoring in a pro-business new government and can only be disappointed if one fails to materialise.

In the meantime, markets just hate elections, particularly one as drawn out as India's, and this can be clearly seen in the performance of the currency. The rupee was up 3% from January 1 to April 7, and attracted strong inflows in both equity and debt, with $4.8 billion of net purchases in shares. Since the election started, though, the currency has been drifting, and is down almost 1%.